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Highfill Faces Financial Disaster, Fights to Keep XNALock Icon

3 min read

Highfill Mayor Chris Holland said it would be a financial disaster for the Benton County city if the Northwest Arkansas National Airport were allowed to detach from the city.

In October, the city of Highfill sued the Northwest Arkansas Regional Airport Authority seeking to block it from filing a petition to detach from the city. The city also wants Benton County Circuit Judge Doug Schrantz to declare Act 769 of 2023 unconstitutional.

Act 769, which went into effect on Aug. 1, gave the Northwest Arkansas Regional Airport Authority the ability to detach the airport from the city by a two-thirds vote of its members. The board is made up of two members each from the five largest cities in northwest Arkansas — Fayetteville, Springdale, Rogers, Bentonville and Siloam Springs — and two each from Benton and Washington counties.

“According to the language of Act 769, the mere filing of a Petition would impair Highfill’s contracts and irreparably harm” the city’s operations and services to its citizens, one of the city’s attorneys, Jess Askew III of Kutak Rock LLP’s Little Rock office, said in a filing.

Last month, Schrantz held a hearing on Highfill’s motion for a preliminary injunction. The judge asked for additional filings from both sides before he makes a ruling, which is expected to be several weeks away.

The losing side will most likely appeal.

In September, the board of the airport, known by its location identifier XNA, voted to detach the airport from Highfill. An XNA spokeswoman said that even before the airport opened in 1998, it was never “intended to be in one set municipality. … It’s a regional asset meant for all of the five cities and two counties.”

The vote came after negotiations between the airport authority’s board and Highfill officials on an interlocal agreement failed. At stake is an estimated $600,000 to $700,000 in annual sales tax generated by the airport.

Holland fears the city would have to cut services if the airport is successful in leaving the city.

According to Act 769, the city would have put in escrow all of its tax revenue and water and sewer revenue until its about $7 million in bonds are paid off, which would be in 2037.

“The problem with that is our sales tax revenue allows us to provide services after the bond payments are made,” Holland told Arkansas Business last week. “So if we’re told that we have to escrow everything, then [the city’s] going to cut services,” such as the police and fire department.

XNA is the primary generator of sales tax in the city along with a Dollar General store and a gas station, according to Highfill’s lawsuit. Highfill’s 2% sales and use tax generates about $1 million a year, and its water and sewer revenue raises about $1.2 million annually.

The city has issued bonds to pay for infrastructure and capital projects, helping fuel the growth of the city at a “pretty fast rate,” Holland said.

In the 2020 census, the city was reported at 1,587 people. The population is estimated at 3,500 now, but when the home construction that is underway is finished, the population is expected to be about 7,500.

If the city has to escrow its revenue, “the city’s solvency and ability to meet its obligations would be measured in days and not weeks,” Askew said in a filing.

The airport has said that it believes the lawsuit is without merit and it looks forward to defending the constitutionality of the act.

Brian Burke, XNA’s general counsel, said that “all statutes enjoy a presumption of constitutionality, and Act 769 is no different.”

The city of Highfill will have to prove at this preliminary injunction stage of the case that it has a likelihood of succeeding in having Act 769 found unconstitutional, Burke said.

In addition, the city will have to prove that it would suffer irreparable harm.

“That’s obviously a very high burden for them,” Burke said. “But while this decision is pending determination by the judge, I’m not going to comment on the merits of their position right now.”

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